MUMBAI, April 17 (Reuters) - India's 10-year bonds gained
for a fourth day and swap rates fell to a 27-month low on hopes
that slowing inflation and a sell-off in commodities would spur
the central bank to cut interest rates for a third time this
year.

Recent data supporting the case for easier monetary policy -
including lower wholesale and retail inflation and languishing
industrial output - has raised the odds the Reserve Bank of
India would cut interest rates at its May 3 plicy review.

A slump in commodities prices has also raised those hopes.
Brent crude slid towards $99 per barrel on Wednesday
while gold on Tuesday hit its two-year low, which is expected to
reduce India's import bills and ease pressures on the current
account deficit (CAD).

The CAD could ease to around 3 percent in the current fiscal
year from prior estimates of about 4 percent due to sharp drop
in global commodity prices, two analysts said on Wednesday.

"Sharp fall in crude and gold prices, if sustained, will put
India in a sweet spot as it will improve the CAD and inflation
situation dramatically giving RBI the room to cut rates sooner
and deeper," said Naveen Sharma, Fund Manager, Bajaj Allianz
Life Insurance.

Sharma has doubled his rate cut outlook for rest of the
calendar year to 100 bps.

The 10-year bond yield ended down 2 basis
point at 7.80 percent. The yield had slid to a low of 7.79
percent earlier in the session, a level last seen on Feb. 28.

Mild profit-taking and government's plan to sell 150 billion
rupees in debt on Thursday capped the rise in bond prices.